$845 billion in the red, what's the true cost and what's the solution?

Yesterday, the Congressional Budget Office’s budget and economic outlook predicted that the federal government will end this fiscal year $845 billion in the red.

But what is the real cost of continuing to accumulate debt?

In a new article based on an American Enterprise Institute study, economist Aspen Gorry and Matt Jensen calculate how much lower taxes could be if the government were not paying the interest on America’s existing debt, and if we headed off the next ten years of debt accumulation.
"Households earning $10,000 to $20,000-around the federal poverty line for an average-size household-could pay $33 less in taxes every year without the existing debt. Households earning $100,000 to $200,000 could pay $4,179 less, and households earning $200,000 to $500,000 could have a $10,472 lower burden.

Even after the recent fiscal cliff tax hikes, the country is expected to add another $3.8 trillion to the debt over the next ten years. If spending were reined in to head off that debt accumulation, households earning $100,000 to $200,000 could see their long-term tax burden lowered by $1,354 every year and those earning $200,000 to $500,000 could see savings of $3,392."


AEI experts frequently write on the need for tax and entitlement reform, and several are available for interview.

Contact MediaServices@aei.org (202.862.5829) to set up an interview.

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About the Author

 

Aspen
Gorry
  • Macroeconomist Aspen Gorry studies employment and tax policy. His research focuses on jobs, specifically on how labor market policies impact employment outcomes for young workers. He has written about the impact of minimum wages on youth unemployment, optimal taxation over a worker's life cycle and the importance of early career experience for workers' labor market outcomes. Before joining AEI, he taught economics at the University of California, Santa Cruz.

  • Phone: 435-797-2397
    Email: aspen.gorry@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202-862-5903
    Email: regan.kuchan@aei.org

 

Matthew H.
Jensen
  • Matthew Jensen is a research associate for economic policy studies. He maintains an active research agenda focused on public finance and taxation, and he coordinates the ongoing development of AEI’s International Tax Database. Jensen has written for The Wall Street Journal, US News, and Tax Notes, among others, and he frequently appears on radio and television. Before joining AEI, he worked for a hedge fund in Minneapolis.


    Follow Matthew Jensen on Twitter.

  • Email: Matt.Jensen@AEI.org

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